GAME reaches final level

European video game retailer GAME is looking doomed after going into administration. The news comes just weeks after it was unable to agree credit terms to stock Mass Effect 3.

As we wrote at the time, GAME had attempted to negotiate new deals with its suppliers after experiencing cashflow problems. The retail chain said a recent agreement with its own creditors to borrow extra money meant it had to treat all suppliers equally and couldn’t afford to give special concessions, even to a giant like Electronic Arts. That meant it had to cancel pre-orders for Mass Effect 3, even though it likely would have been a top seller.

Perhaps inevitably the news caused a domino effect, with other game publishers also becoming wary about supplying games without up-front payment. That led to further concerns about cashflow, along with worries that the company wouldn’t be able to make its quarterly rental on store locations, which is due at the end of this week.

Yesterday morning GAME requested that shares in the company be suspended from trading. It then applied for voluntary administration. This is roughly equivalent to the US chapter 11 bankruptcy and means the company has 10 days’ protection from creditors to find a solution before independent administrators can consider liquidating the business. The stores will remain open for business during this time.

Two financial fund groups along with US chain GameStop are believed to be interested in taking over the firm. The main potential sticking point is how much of the existing debt a buyer would take on.

If the company is liquidated, customers would likely be low down the list of priorities for payouts, particularly given the British tax department is among the creditors. That may mean its worth thinking about spending any online or loyalty card credit in the coming days.